Agreement inspired by Dispatch series could improve credit scores for millions

Sunday

Jul 2, 2017 at 5:00 AM

Jill Riepenhoff The Columbus Dispatch @JRiep

The hammer that a coalition of 31 state attorneys general lowered on the three national credit-reporting agencies two years ago now is likely to provide its biggest benefit to consumers.

As of Saturday, Equifax, Experian and TransUnion no longer are allowed to place tax liens and civil court judgments on consumers’ credit reports without guaranteeing that the debt belongs to the consumer. And beginning in September, the agencies cannot place unpaid medical debt on a credit report until it’s at least six months old.

As many as 12 million consumers could see an improvement in their credit scores with this information — which often is wrong — erased from their reports.

Not a single court in the country sends tax liens or judgments to the credit-reporting agencies. Rather, the agencies hire third-party vendors to scour court records and report that information to them.

That has proved to be a recipe for disaster, as reported in The Dispatch's yearlong investigative series into the credit bureaus in 2012, "Credit Scars," which is available at http://bit.ly/2u3usxw and helped inspire the attorneys general and others to take action.

The credit-reporting agencies sometimes have assigned these debts to the wrong consumers based on faulty information from the vendors. They have supplied misspelled names, and Social Security numbers and dates of birth that are one digit off, making it easy for a bad debt to end up on the wrong credit report.

The agencies use an algorithm to match consumers to debt that doesn’t require that names, Social Security numbers, addresses or dates of birth exactly match. So a valid judgment against John Smith in Columbus easily could be assigned incorrectly to John E. Smith in Bexley.

These liens and judgments even wreak havoc when the credit-reporting agencies assign the debt to the right consumer. They’ve sometimes reported dismissed cases and cases that were settled in favor of the person who was sued.

And the agencies have not followed up on these debts to report when they are settled or paid in full.

“The three largest credit bureaus will be forced to end this reckless practice as the result of a settlement with the attorneys general,” said Persis Yu, an attorney with the National Consumer Law Center based in Boston. “Unfortunately, inaccuracies and errors plague credit reports, with estimates of serious errors affecting up to 25 percent of reports. Sloppy tactics such as attributing judgments to consumers without full identifying information increase error rates.”

The Dispatch's “Credit Scars” series illuminated the plight of thousands of Americans who, through no fault of their own, had been harmed by flawed reports. Their stories were documented in nearly 30,000 complaints filed with the Federal Trade Commission and attorneys general in 24 states that the newspaper collected and analyzed.

The series prompted Ohio Attorney General Mike DeWine to launch an investigation and to recruit 30 other states to examine why the nation’s three largest credit-reporting agencies were ignoring and mishandling consumers’ complaints.

DeWine is pleased with the changes that the credit-reporting agencies are making. These new practices "will further enhance the accuracy of individual credit files and address a previous area of concern ... that led to a number of inaccurate files," a spokeswoman for Dewine said in an email. "Now, as changes are being implemented, we have a better system.

"We are proud Ohio led the nation in reforming the credit-reporting agencies."

The settlement gave Equifax, Experian and TransUnion until August 2018 to change the way they do business to ensure that consumers’ credit reports are accurate and not riddled with errors and debts that don’t belong to them.

“Equifax, Experian and TransUnion continually seek ways to ensure the data they maintain on their consumer credit files is accurate and current, to best serve consumers and the needs of their business and government customers,” industry spokesman Eric J. Ellman said in a written statement. He is president and CEO of the Consumer Data Industry Association, a trade organization that speaks on behalf of the credit-reporting agencies.

Also in 2012, the Consumer Financial Protection Bureau, a federal watchdog, took a supervisory role over the credit-reporting agencies so that it could investigate their practices.

In March, the federal bureau issued a report that showed accuracy issues persist, although improvements have been made.

"Since we began our oversight work, the CFPB has been uncovering and correcting problems in the consumer reporting industry," bureau Director Richard Cordray, a former Ohio attorney general, said in a written statement at the time. "Because of our work, important improvements are being made. Much more work needs to be done, but our corrective actions are leading to positive changes that are benefiting consumers all over the country."

More than 185,000 consumers have filed complaints about the credit-reporting agencies in the past five years.

The CFPB database doesn’t contain names of consumers but does tell one heart-wrenching story after another.

Three times, a Georgia consumer sent Equifax court documents showing that tax liens against her had been paid. Yet the liens remained, keeping her credit rating low.

A civil lawsuit against a married couple was dismissed when the plaintiff failed to show up for court. Yet the lawsuit showed up as a judgment against them in their credit reports. “This is seriously affecting our credit and lives,” the couple wrote to the consumer bureau.

Medical debt is an especially prickly issue, as consumers find themselves in the crosshairs when health-care providers fail to bill insurance companies.

Beginning Sept. 1, consumers will have a six-month grace period before an unpaid medical debt can be placed on their credit reports.

This step removes “a source of debt that is often unanticipated or erroneous but comprises one of the most common types of consumer debt,” Yu said. “We expect that the result will be better accuracy for consumers.”

Financial experts and advocates recommend that consumers check each of their credit reports annually, to dispute errors to the credit-reporting companies and to file complaints with state and federal agencies if they fail to correct mistakes.

Consumers can access their credit reports and scores at the official source for free annual credit reports, www.annualcreditreport.com. Yu said that consumers should stagger their requests by ordering one report from each of the credit-reporting agencies every four months, essentially obtaining “credit monitoring for free.”

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